Grilling Steinbrück

Show: the nightly news analysis segment tagesthemen, led by talking head Caren Miosga

Interviewee: Peer Steinbrück, federal finance minister, known market economy advocate in the SPD (yet also advocate of international regulation)

Occasion: the new German bank bailout plan. This foresees €400 billion in credit guarantees to re-start interbank lending, €20 billion for actual call-downs of those guarantees, €80 billion for capital injection in the form of equity purchase at the price of banks accepting intrusion into management by the financial minister.

The video (29 min, interview until 10:10).

The whole interview is a bombardement of Steinbrück with accusations, who looks nonplussed (but does reply). At one point, he says: "We just want to put our plan into practice, and I'd be thankful if the media would help... we have to re-create trust, and that's not only the job of politics, but the media, too!" But Miosga simply ignores him and goes on. What's noteworthy is less the substance (Steinbrück gets to present his bailout package in a coherent way), more the harshness of these attacks.

Steinbrück already begins with a preemptive strike, emphasizing that the package is meant to save citizens' savings and keep small and big companies running.

Miosga asks who pays for it all, Steinbrück says no new taxes especially not in a downturn, and points out that the credit guarantees aren't payouts, while the capital injections come with hard terms that can and will include a limitation on manager renumerations.

Miosga bites hard: "Now that the stock price of worst-hit bank HypoRealEstate shot into the sky, those who drove it deep are now bargain hunting and make good money? You haven't changed anything on this system!" Steinbrück has to defend himself: "Would you rather have stock prices falling further?"

Miosga: "Plan A was guarantees for German savers. Plan B is now guarantees for credit institutes. What will be Plan C?" and refers to surfacing demands from the real economy for state help. Steinbrück again explains the desired effect of the plan in re-starting lending, says the new package will prevent a breakdown of the real economy.

Miosga then bites real hard: "Three weeks ago ... you said German banks are stable. A week ago, you said savings/deposits are stable. Now you say the economy is stable. Does that follow a logic that any time you promise that everything will be fine, then things will turn even worse?" [suppressed smile] Steinbrück blames external factors, e.g. Lehman Brothers for unexpected changes.

Steinbrück also admits that the total national budget [including the already balanced state budget] can now be balanced only after 2011.

Dare More (Attacks On) Capitalism

Show: nightly political interview/talkshow of journalist Reinhold Beckmann, who is (or imagines himself to be) hard-hitting

Interviewee: Friedrich Merz, former CDU heavyweight, privately working in a law firm. The self-styled tax and finance expert of the CDU represented the neoliberal line, a founding member of the infamous Andenpakt power alliance of younger CDU guys. After some close cooperation, Merkel tried and succeeded in blocking his career advance, and steered the party away from Merz's favoured policies, upon which he resigned his leadership positions in 2004. (Personal observation: in my impression, the always luckless Merz lacked the willingness and talent for manipulation of his Andenpakt colleagues or indeed Merkel -- also shown by abject failure when he tried. Thus, despite his line on the economy, I could never could see him as a threat like say Hessen's Roland Koch, or even much of a threat to Merkel. He's probably more honest in his views than most politicians.)

Occasion: Merz published a new book, with the (translated) title "Dare More Capitalism" (huh!)

Video (22:35)

Beckmann begins by mocking and pestering Merz regarding his book title ("Haven't you tried to change the title before publication?").

Merz starts with a preemptive description of the problems: he submits that the FED followed a policy of cheap money, which fed and led to the mortgage crisis, and states that there are systemic problems in the US financial system -- and claims he talked about the problems a year ago (Beckmann: "Why has no one listened to you?"), and points at the proposed updated international banking regulation agreement Basel-II ("you surely don't know what's that") as an on-going European project to address the problems.

Then Merz praises the Euro and claims the crisis would have been worse without -- I have to say, well said.

Then Merz defends German bank CEOs as good managers... but he already got nervous going into it: calls Beckmann Beckstein...

In response, Beckmann pushes him on greed ("they don't care about common good"), Merz recounts the dogma: 'core of market economy: manage greed to work for the common good'. Beckmann: "So if the finance system must be saved by the state, your world must be truly disturbed, where are the market's self-healing forces you believe in?" [BANG! have you read these lines outside blogs and the ramblings of some commies until recently?] Merz goes on by suggesting more/better regulation.

Beckmann wants to push him on the issue of the responsiblity of managers. Merz claims there is a full-range manager liability in Germany -- Beckmann: "But it failed." At this oner point Merz is helpless.

As successive measures to fight the financial crisis are discussed, Merz has to voice support to all of them --- to support a series of  measures by the state -- even on not letting banks collapse to save clients.

Merz goes on about economic cycles, Beckmann: "but what if profits are always privatised and losses socialised?", but Merz is allowed to wiggle free with non-sequiturs like that now even some of the financial firms are making losses.

Instead of nailing him on this, Beckmann chooses to put his fingers in Merz's wounds: "If you are such a big financial expert, why doesn't your party utilize your talent?" Merz: "You have to ask others about that" -- but Beckmann grills him about the relationship with Merkel for a few minutes more.

Later, Merz goes on about state spending, mentioning the healthcare and retirement funds as giant elephants, Beckmann: "Your solution: private, private, private?" (Merz is hurt, but says no; he did actually have a different concept -- but explaining the German social insurance reform plans would need a whole other diary.)

Beckmann: "Where have you invested your own money? Derivates? Have you been risk-loving?" Merz: "Nnno, I bought stocks, and sold them at the right time... eeeh... and even re-purchased some..." [big smile] Beckmann pushes him on about the losses of small investors.

Capitalism is not the system of the future

Show: the same, continuing, with two more guests joining for a discussion, which, in effect, meant that Merz was grilled 1:3 instead of 1:1

Guest 2: Heiner Geißler, elder statesman (CDU). He rose high in the eighties under Chancellor Helmut Kohl (he was also embroiled in Kohl's black accounts scandal), was famous for attacks on any suspected supporter of domestic far-left terrorism or the USSR, but also a support for a social market liberalism with social writ large -- by 1989, he broke with Kohl in a way paralleling Merz vs. Merkel. As his party moved neolib on the economy, not only did he become critical, but started to share platforms with leftists -- he even joined ATTAC.

Guest 3: Harald Schumann, journalist (formerly SPIEGEL, now Berliner Tagesspiegel), a critic of globalisation who predicted the crash.

Video (30:25)

Geißler starts with a sting: "Merz belongs to the brave people. He won't be spooked by facts." He declares that social market economy was always the CDU's economic policy rather than neoliberal market economy.

Schumacher: problem was less the regulated banks themselves, more that over 50% of banking happened beyond the regulated system (hedge fonds etc), which came because the regulators' independence was voided due to personal interrelation.

Schumacher: "Hank Paulson was boss of Goldman Sachs." Merz: "But the problems started before Paulson!" Schumacher: "Yes, but before Paulson, there was Bob Rubin, who also came from Goldman Sachs."

Schumacher quotes Walter Eucken, an ideological founder of German social market economy: "The problem is not the abuse of economic power, the problem is economic power." He follows that in the present case, the ballooning companies of the financial world gained too much power over politics.

Geißler begins a tirade against supply-sider ecomomics, Merz interrupts and tries to tell him that Germany's success in his own time in the eigthies was because of supply-side economics. Geißler counters (in the tone of an old teacher) that that was combined with an extension in the social systems, which wasn't done in Eastern Germany after Reunification, and one could see the results.

Schumann lists German examples of personal entwinement between regulation bodies and financial companies, Beckmann hits out at Merz by asking him whom does he work for now in the private economy. Merz rather answers Schumann, and tries to defend the practice of managers swapping jobs between regulating bodies and financial companies, but he really sweats and makes grimaces.

Schumann criticises the €20 billion earmarked for actual pay-outs for credit guarantees (e.g. for failed credits) -- who pays for it, why should every taxpayer pay instead of a special tax on those who created the mess?... and compares this sum to the annual payout under Harz-IV (the 'reform' law combinedining - and reducing social and long-term unemployment benefits): €22 billion. Merz counters: the state debt payments are a triple of that, "we leave this behind for our children" -- Schumann: "We also leave behind for our children the wealth created by investing the borrowed money!"

Geißler says it would have been nice if Merz et al would have talked two years ago like he does now.

Schumann returns to the point that financial CEOs have too much power already thanks to the size of their paychecks (saying that the top 20 hedge fond managers with their annual renumerations of €600 million[!] are far above even the boss of Deutsche Bank). He attacks Merz as part of the problem in his law firm serving the private equity companies. Merz sweats but says his voters know where he works, but then a long controversy follows about his earlier legal protest against parliament's demand to publish his clients.

Beckmann asks all: "With the current bailout packages in place, what do you except in one year?"

Geißler: it depends on whether new regulations stop banks from "re-starting the gambling". Emphasizes internationality, he is not against globalisation but wants "politics to get at eye level again" with economic players.

In a clip from an earlier show, former chancellor Helmut Schmidt criticises the G7, says it's too small now to deal with it and China, Brazil and others should be involved, Merz again feels forced to agree. Merz also denies he'd disagree with Geißler's socialistic thematisation of Harz-IV taking away a few euros more from poor people while HypoRealEstate's CEO will go into retirement with €34,000/month.

Big mess about whether warnings were heeded in Europe (Merz claims Basel-II was just about that, Schumann says it was late and not regulating hedge fonds et al.)

Schumann all Keynesian: throttling of investment should be stopped with big state investment programme, especially in energy sector [hey! is he reading ET?], and also prevent a jump of joblessness.

Geißler's closing declaration: "The capitalist system IS_NOT_the sytem of the future. That must be said to the people."

My commentary on the Beckmann show

From a purely rhetorical poit of view, I saw Merz clearly forced into a corner and outclassed (then again, it was 1:3). Beckmann, Geißler and Schumann brought up almost all the important points and talking points on the issue -- again, all stuff you oly read in blogs and heard from 'radicals' until a few weeks ago, with journalists and other Serious People dismissing them with a smile.

On the other hand, all three opponents ried to catch Merz on the issue of whether he spoke up about the structural problems earlier -- but couldn't really nail him. But IMO this could and should have been done, and would have been important: had Merz realised the gravity of the problem, he wouldn't have seen it as something for a book or for drawn-out Basel-II negotiations, but should have issued loud proclamations in the media that something must be done, now.

On a more general level, what lacked was a real confrontation: in the end, Merz's posture was "but I want those things, too, don't put things in my mouth!". (Now then why did he not thematise those as stongly as his criticism of state spending and over-regulation over the past few years, should have been asked.)

Part of this was the same old same old of MSM journalism. I had liked if at least Beckmann had actually read Merz's book and confronted him with a selection of his own theses from there: it was nice that Merz was used as whipping boy to burn a string of neolib talking points that were received wisdom util recently, but he ould have been cornered over more than minor points like Rubin being of Goldman Sachs too.